Martha Bonilla is not your typical middle-class worker. And it’s not just that she was born in a backwater of El Salvador and crossed Mexico hidden among a pile of bananas in the back of a truck to make her way illegally into the United States at age 20.
Like millions of Americans lacking a college degree, the 44-year-old mother of three works on the bottom rungs of the service sector, in a kitchen run by the food-service contractor Restaurant Associates in Cambridge, Mass. Food preparation and service is the lowest-paid occupational group in the economy; even in Boston, it typically pays less than $27,000 for a full-time, year-round job.
Yet there Ms. Bonilla sits at her kitchen table in the solidly middle-class neighborhood of West Roxbury. She and her husband, Felipe Villatoro, both legal residents, bought the house 12 years ago for $350,000. It’s their second; she rents the first to members of her extended family. The vacations in Florida, the 401(k), the $1,700 a month they pay for their daughter’s college tuition and fees — all speak of America’s dream.uition and fees — all speak of America’s dream.
“Coming to the United States was the best decision I ever made,” Ms. Bonilla said.
What’s the trick? Ms. Bonilla’s job with Restaurant Associates is to make breakfast and lunch for executives pursuing extension courses at Harvard Business School. At the university, service workers on the payroll of an outside contractor earn the same pay and benefits they would get as direct university employees — including health insurance and pension benefits, paid vacation and child care assistance.
This parity policy was formally adopted across the university 16 years ago by Lawrence H. Summers, then Harvard’s president. At a stroke, it ended the practice of outsourcing dining, security and other such services simply to save on labor costs. “The effect of this policy is to remove some of the economic incentives to contract out those positions,” said Michael Kramer, organizing director at the Cambridge area local of Unite Here, the union covering food service workers.
Critically, unions covering Harvard’s in-house janitors, cooks and guards — which had been losing ground to outside contractors — were empowered to bargain hard for pay and benefits without fear of encouraging more outsourcing. What’s more, contractors themselves became more union-friendly once the university took over the determination of wages and benefits. In 2001, before the policy was put in place, only 58 percent of the workers at outside contractors operating at Harvard were represented by a union. By 2013, the share was 96 percent.
For Ms. Bonilla, the result is an hourly wage of more than $25. Adding the money from a part-time job cooking at a student dorm, most weeks she clears more than $1,500. That exceeds the typical weekly pay of a worker with a master’s degree. Adding in the wage of Mr. Villatoro, also a cook at the business school, the family earns almost $120,000 a year.
As the wages of American workers without a college education languish below where they were 40 years ago, Harvard’s experiment has led some economists and union organizers to think about similar arrangements to broadly benefit low-pay service workers, who form the biggest and fastest-growing part of the job market.
To be sure, Harvard’s employment policies affect a limited population. Only 275 dining workers, 404 security guards and the 370 custodial workers are employed by subcontractors, and another 1,105 work for the university. It’s an open question whether larger organizations, or those without multibillion-dollar endowments, can follow its lead.
“This is an important private-sector policy innovation — a very good template for a socially minded organization,” said Mr. Summers, whose tenure was sandwiched between his service as Treasury secretary in the Clinton administration and his time heading the National Economic Council under President Barack Obama. But he acknowledged that the experiment carries trade-offs.
Even if the goal is laudable — lifting workers from the bottom of the labor market into the middle class, stimulating the economy and pushing against the country’s widening wage inequality — Mr. Summers noted that policies like these “make it more expensive to do the things you do.” Setting too high a pay floor could force businesses to hire fewer people, making many worse off.
Still, some 45 million Americans work in low-end service jobs — personal care aides, cooks, janitors, sales reps — typically earning less than $30,000 a year. By 2026, the government projects, the number will be 50 million. Outsourcing is one of the main dynamics keeping their wages down, and the Harvard experiment is a useful case study of how institutions can use their clout to force a remedy.
Recent research by economists at four top universities and the Social Security Administration concluded that the parceling out of less-skilled work to low-wage contractors — Goldman Sachs outsourcing its janitorial services, say, or Apple contracting out the assembly of its iPhones to Foxconn — could account for around one-third of the increase of wage inequality in the United States since 1980.
That concern is on the mind of David Weil, who headed the wage and hour division of the Department of Labor during the Obama administration and is now dean of the Heller School for Social Policy and Management at Brandeis University. “The question is can we re-establish some normative minimum that is presumably above what sheer market forces would drive wages down to,” Mr. Weil said. “The idea is to set a wage norm through a contracting standard.”